This one's for a Mumbaikar! - Views on News from Equitymaster

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This one's for a Mumbaikar!

Jul 29, 2005

Thank God that no political establishment has, till now, blamed foreign intelligence agencies for the flood situation faced by the financial capital of India, Mumbai, since the past 3-4 days. Life stood standstill! Mumbaikars withstood, this time the onslaught of rains (and not bombs) as they made their way through to their homes after 24-36 hours of struggle. Even the equity markets (which remained open despite the heavy rains) seemed to cheer the spirit of the 'half underwater' man on the street. The quote, "Life must go on" was characterized to its best as Mumbai braved the 8th highest rainfall in India's history. This downpour, however, brought to forefront the loopholes (no, not drainage holes!) in the city's administrators' contingency planning systems and forecasting abilities of the Indian Meteorological Department, which again proved its abilities in predicting rains after they've already arrived! While there's no denying the fact that such a high level of rainfall was unprecedented, the dream of making Mumbai the next Shanghai has surely been shaken. Forget Shanghai, Mumbai, being India's financial capital, needs to become India's best city first in terms of infrastructure and quality public services. Shanghai is a long way ahead!

As for the stock markets are concerned, there's been nothing stopping them in creating new highs as days pass. While there are all reasons to believe that fundamentals do not justify such a momentum, how do you make believe the small investor who has 'given his all' to media reports justifying 'Buy' recommendations on stocks whose underlying companies have not performed well in the past and have serious management issues. What should a retail investor do if not give in to the 'strong' arguments that follow such recommendations? Here's a way out. Stop listening! Do not let a misguided step turn your investment venture into a speculative misadventure.

India is surely on a growth path. We understand that! But the path ahead will surely not be as benign as has been the case in the past two years. There are enough global (remember, we are a global economy now!) imbalances like the fragile US economy and interest rates, slowing China and currency adjustments, which might strike a strong negative chord anytime.

Investors, thus, have to be patient with their money. Mumbaikars can well teach others a lesson or two about this theory of maintaining discipline and balance of mind in times of uncertainty and crisis! Whatsay? Neck deep waters are navigable, but neck deep losses can sink you!

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